Many of the world’s largest economies are headed for a recession, with surging inflation levels and considerably lower than desired gross domestic product (GDP) growth.
A combination of soaring energy, food and transportation costs are the main driving factors, as well as China’s most recent Covid-19 lockdown that’s adding to the global supply chain woes.
So, let’s take a look at how some of the largest economies are faring so far in 2022.
UK
The UK’s economy (GDP) contracted by 0.1% in March, following 0.1% growth in February.
This is largely attributed to the rising cost of living from hiked energy and food prices, which heavily squeezed household’s budgets and dented consumer spending and confidence.
Imports for March increased, reinforcing the decline in UK output.
Meanwhile, its consumer price index (CPI), which is the measure of inflation, reached 7.0% in March – the highest level since 1992.
UK inflation rate date has economists predicting a 9% gain in April, according to Bloomberg, while the Bank of England (BoE) warned inflation could likely reach 10% by the year end.
The BoE hiked interest rates to 1% at the beginning of May, for the fourth consecutive time, which was the highest level since the aftermath of the financial crisis in 2009.
There tends to be an inverse relationship between inflation and interest rates, so by raising rates, in theory, inflation should fall.
This is because with high interest rates consumers are tempted to save rather than borrow, which reduces the amount of money in circulation in a market and, in turn, leads to reduced price increases.
US
Like the UK, America has been experiencing undesired economic patterns that tend to point towards a looming recession.
Monthly US GDP fell 0.4% in March following a flat reading in February.
Inflation figures slowed in April to 8.3% after seven months of gains, new Labour Department figures showed.
Although it must be noted March’s year-on-year figure of 8.5% was the highest rate since 1981.
Germany
Going back to Europe, similar trends are being experienced in most of the continent’s largest economies.
Its output edged cautiously higher by 0.2% in the first quarter of the year, while inflation increased 7.4% year-on-year and was 0.1% higher than the previous month.
The nation faced a barrage of problems, including a Covid outbreak that peaked in March, while China’s recent lockdown further exacerbated pandemic-related supply issues that hit Germany’s key manufacturing sector, Bloomberg commented.
Germany was the most heavily reliant on Russian oil in the European Union in terms of barrels per day (bpd), at 550,000, which accounted for 34% of the nation’s 2021 oil imports, the International Energy Agency (IEA) said.
They have heavily reduced this percentage in recent weeks, which contributed hugely to soaring energy prices.
Italy
Italy’s CPI advanced 6.6% last month from a year ago, slowing slightly from March.
Its economy shrank 0.2% in the first quarter compared with 2021 Q4, hurt especially by surging energy costs and uncertainty of a war.
Energy costs rocketed 27%, Bloomberg confirmed, but food and transport prices also climbed higher.
Its economy minister Nadia Calvino slashed economy expansion forecasts to 4.3% from 7%.
The government spent 20bn euros to try to alleviate the energy and fuel-cost hikes for businesses and homes.
France
France’s inflation rose to 5.4% in April – its highest level since the euro was introduced and exceeding economist’s expectations.
Meanwhile, consumer spending fell by 1.3% in March – well above the 0.2% contraction anticipated.
Russia’s invasion or Ukraine halted what’s been Europe’s standout economic recovery from the pandemic, with output unchanged in the first three months of 2022, following a higher than expected expansion in 2021 Q4.
France’s government spent 25bn euros to date on price-caps and fuel rebates to offset soaring energy costs.
China
China, which historically has one of the highest economic growths in the world, was also experiencing setbacks by its standards.
In the first quarter, its GDP grew by 4.8% year-on-year, but in normal times it tends to be double that figure and was 8.0% in 2021 despite the ongoing pandemic.
China’s annual inflation rate accelerated to 2.1% in April, up from 1.5% the previous month. But its official CPI target for 2022 is around 3%, CNBC said.